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Overturning An Unexplained Wealth Order

Overturning An Unexplained Wealth Order

National Crime Agency v Baker and Ors

We previously discussed the nature of Unexplained Wealth Orders (UWO) in a recent article.  The law around UWOs is still developing and a case involving the discharging of such an order was decided in September 2020.  National Crime Agency v Baker and Ors scrutinises the evidential thresholds to be met in raising a presumption that property constitutes the proceeds of crime.  It also examines the Prosecutor’s requirements to meet proportionality conditions.

Background

The Respondents applied to discharge three UWOs and related interim freezing orders (the orders) placed against three London properties.

The first Respondent (B) was the president of the second and fifth Respondent foundations, which were the registered owners of the first and third properties respectively. The third Respondent foundation and the fourth Respondent company were the registered owners of the second property.  The NCA imposed the orders ex-parte (without notification) under the Proceeds of Crime Act (POCA) 2002, section 362A to 362R.

The NCA presented extensive evidence that the properties had been bought to money launder the proceeds of unlawful conduct by a Kazakhstan national (S) who died in custody in 2015.  The orders demanded information regarding the source of the funds used to purchase the properties, details of the transfer, and particulars of the registered and beneficial owners.

The requested information was provided.  The beneficial owner of the first and third properties was S's ex-wife, the owner of the second property was their son (N), and that the basis of the NCA's applications was factually incorrect as the property purchases were unconnected to S.  Despite this, the NCA refused to withdraw the orders.

The Respondent argued that the NCA’s investigation had been flawed and certain material had not been disclosed.  They stated that they could now provide further information and the orders were made on flawed grounds.

The decision

Justice Beverly Lang granted the application to have the orders removed and gave the following reasons.

Regarding the first property, the NCA submitted that S was the founder of the second Respondent’s foundation.  However, the argument that the foundation was built on the proceeds of unlawful conduct was unreliable and probably wrong. S’s ex-wife provided frank disclosure of a historical link to S’s property that the NCA was unaware of.  She had purchased Property 1 using the proceeds of the sale of her shares in a company, which she had acquired on her divorce from S, who had been a wealthy and successful businessman.  There was no question that the divorce settlement was legitimate.  The beneficial ownership and funding of Property 1 were therefore no longer "unexplained".   The NCA also put significant weight on the “secretive and complex” manner in which the first property was obtained and managed.  However, the Court held that such behaviour did not give rise to an "irresistible inference" that it [the purchase] was the product of unlawful conduct.

Furthermore, under section 362B(2)(a) POCA 2002, the UWO Applicant must prove that the Respondent “holds the property”.  Justice Lang concluded that there was no reasonable cause to believe B had “effective control over the property” as management of the property was vested in the second Respondent and its governing body, the Foundation Council.  This alone was sufficient to discharge the orders.

Furthermore, although the value of the property met the required threshold of £50,000 there were no reasonable grounds for suspecting that lawfully obtained income could not provide for the purchase of the property or that B was a politically exposed person (PEP) or was involved or connected to serious crime.  All these factors applied to the second and third properties as well as the first.

Comment

Justice Lang stated that the NCA was not guilty of material non-disclosure.  However, the agency’s investigation had been inadequate.  It had not carried out a fair evaluation of the material provided by the Respondents, particularly regarding the purchase of the properties on behalf of the beneficial owners and the fact there was no link between S and the foundations.

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